There is lots of misinformation on the Internet regarding debt and credit cards. These are the biggest myths about credit cards. Make sure you don’t f...
There is lots of misinformation on the Internet regarding debt and credit cards. These are the biggest myths about credit cards. Make sure you don’t fall for these.
Myth #1. Closing your credit cards will help your credit score.
Absolutely not. Closing your credit card acounts might be a good idea if you have a hard time controlling your spending,
but you can’t improve your credit score by doing that.
The minute you open a new card, you’ve done the damage to your credit score. Closing the account shortly after you opened it may do even more damage to it. Your credit score partially depends on how much money you are using versus what you are spending. By closing your credit cards at once you will shrink your total available credit.
Myth #2. Your credit card isn’t open until you activate it, so if you applied for one and changed your mind, it does not affect your score.
Wrong. If you decided to open a new card, but then changed your mind and decided not to activate it, you’ve already done damage to your credit score. As soon as the issuer pulls your credit report, your score decreases by up to 5 points.
Myth #3. If credit card companies are sending me applications by mail, then my situations is probably pretty good. If I couldn’t afford it, they wouldn’t have sent it.
Wrong again. Credit card companies make money on people who can’t afford to pay off their bills in full every month. They don’t care if you are in debt up to your eyeballs. They are sending you offers and applications based on mailing lists, but this is your responsibility to see whether or not you can afford another credit card.
Myth #4. If I don’t use credit cards or loans, I will never be able to buy anything.
This mentality got the majority of Americans in debt. In many countries people don’t use credit cards and they can afford more things that Americans do. How? Because they save. Because instead of getting in debt and paying thousands of dollars in interest, people save money and then use cash to pay for what they want. It is much cheaper to do it this way.
While it is very hard to save money to buy a house, it is realistic to save money for a washer and dryer, a new sofa, vacation or even a car.
Many people make impulse purchases because they see a great deal. They jump on it and don’t realize that by taking credit to make the purchase, they will be paying interest to credit card companies, which is often much more than what they save.
Myths #5. When you pay with a credit card, some merchants are required to see your Driver’s License.
This is actually is misconception as well. Merchants are not only not required, but are forbidden to ask for your ID as per agreement with Visa and Master Card. Other major cards (such as for example, Discover) do not forbid merchants to ask for the IDs, but they strongly discourage it.
Do not fall for debt or credit card myths, because they can cost you lots of money. It is your job to educate yourself and to be able to distinguish truth from lies.
